Among the many topics on which the Supply Chain Leaders Academy educates its members, the distribution centre and its operation features strongly. This fact reflects the importance of the DC in today’s fast moving supply chains.
For many students of supply chain matters though, the very first thing to learn is exactly how a distribution centre differs from a “warehouse”.
There’s certainly no shame in not knowing, especially as the terms “warehouse” and “distribution centre” are often used interchangeably. After reading this post however, you should be very clear about the difference between the two different types of supply chain facility.
Distribution Centre Velocity
The biggest clue to the purpose of a distribution centre lies in its name. While a warehouse is clearly associated with the need for storage, distribution centres exist to keep goods on the move as much as possible and actually, as fast as possible.
Of course it’s necessary to have storage space in a distribution centre, but one would hope that nothing stays in that storage space for very long.
A distribution centre is all about supporting a high-velocity supply chain, providing a facility to consolidate shipments of finished or part-finished goods, and/or to break bulk shipments down into smaller loads for customer deliveries. Storage space in a DC is important, but is equaled in terms of necessity by that used for materials handling.
A Base for Added Value
Another use for the space provided in a distribution centre, is to perform activities which add value to products and services. For example, a warehouse may be used purely to serve as buffer storage, to stage inventory on its way through the supply chain and hence may not house any kind of order processing activity.
A distribution centre on the other hand, will always be a place where customer orders are picked, packed, and dispatched to customers.
Other value-added services which commonly take place in a distribution centre include product assembly, customisation, or configuration, returned-goods processing, and perhaps cross-docking.
Furthermore, it’s very likely that a distribution centre will house facilities other than a warehouse. For instance, companies with transport operations typically base their vehicles and transport workforce in distribution centres, along with transportation management and administration teams.
Distribution Centres are Customer-focused
Warehouses can serve many uses in a supply chain, some of which have very little relevance to customers. You might find a warehouse or two within a production facility for storage of raw materials or finished goods.
Other warehouses, as already mentioned, may simply serve as storage points for stockpiled inventory. In these cases, customer service is not something the warehouse workforce or management even needs to think about.
It’s a completely different story in a distribution centre. One of the DCs primary functions is to support customer service excellence, serving as a place to improve the flow of goods through a supply chain: not to support static storage. The DC management team will be measured on its ability to meet customers’ needs in accordance with the company’s business strategy.
Learn More About Distribution Centres and DC Processes
So now you know the fundamental differences between warehouses and distribution centres. Of course there is a lot more to know about distribution centre operation and, as stated in the first line of this post, you can learn about the topic in depth at Supply Chain Leaders Academy.
If you are already a member, you can immediately get some more distribution centre questions answered in eClass number 15. If you haven’t yet joined us, a world of supply chain learning awaits. Contact us today to find out more about Supply Chain Leaders Academy, brought to you by Rob O’Byrne and his team at Logistics Bureau.